Earnings season continues to create landmines!
Another day where Aussie stocks defied a reasonable lead from Wall Street early on with some selling in the commodity space hurting the index early, while a story in the AFR about CBA and money laundering prompted some selling there – although nothing too substantial – the stock closing down -0.31% to $83.97. On the broader market, the Utilities were well supported today, the sector up by +0.92%, while most weakness was seen once again in the Telco’s - an overall range today of +/- 38 points, a high of 5744, a low of 5706 and a close of 5735, off -9pts or -0.16% - however that was a good +29pt recovery from the lows.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Suncorp (SUN) – A disappointing result from SUN today and this is a stock that features in our portfolio’s in large size. The stock dropped by 6.41% today to close at $13.57.
After today’s weakness, we’re still in the black in terms of the MM Growth Portfolio however we’ve now given back a large proportion of our unrealised gains. The obvious question becomes – are we buyers, sellers or holders?
Firstly, the result was a miss in terms of consensus earnings by around 4%, however there were a few analyst outliers who had more bullish assumptions baked in. The above table sets out the score however clearly the result was messy. Interestingly, the core Australian Insurance and Banking businesses (90% of earnings) performed well however there was some obvious issues (and big misses) in some other businesses as highlighted above. The other issue was around smaller than expected reserve releases which came in at ~$300m versus ~$400m anticipated.
Clearly the market disliked aspects of the result, and that’s understandable, however SUN are doing a good job driving top line growth with mid-single digit premium rate increases in general insurance, good claims management in Australia, excess capital to drive strong dividend growth and setting the business up for better medium term performance. In short, we remain buyers
Suncorp (SUN) Daily Chart
Commonwealth Bank (CBA) – an article in the AFR today at lunchtime prompted some selling in CBA, however it probably got more attention in the media than it did in the market. In essence, AUSTRAC are alleging there were 53,700 contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act which requires banks to report cash transactions involving more than $10,000 each. AUSTRAC reckons that $89m in cash transactions should have been reported, and weren’t during a short period in 2012. Obviously not a positive but we doubt they’ll be any meaningful share price reaction as a result of this…CBA closed down -0.31% to $83.97
Commonwealth Bank (CBA) Daily Chart
Have a great night
The Market Matters Team
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